The National Bank doubts the Government will manage to keep its fiscal policy promises of not resorting to significant tax increases, and takes into consideration the emergence of decisions that will make its battle with inflation all the more difficult.
"We keep seeing all these discussions, that there is an issue being debated regarding the level of budgetary revenues," NBR Governor Mugur Isarescu stated yesterday, adding that the Finance Ministry probably had different priorities in mind when building the budget so as to accommodate a 5.5% inflation rate for 2006, whereas the NBR''s target is 5%.
Isarescu''s concerns have not been put to rest by the statement of the Finance Minister Sebastian Vladescu that he would quit should he find himself having to increase any major tax. "He can resign and then somebody else can come along to do the job," the head of the central bank said.
Under the circumstances, the NBR regards the configuration of future fiscal policy, especially regarding budget revenues, as a serious element of uncertainty, fearing it could jeopardise its inflation target for next year.
After all, one of the five exonerating clauses which the NBR could argue, should it happen to miss its inflation target, is precisely the occurrence of slippages in the implementation of fiscal and revenue policy.
"If we had had the guarantee that the budget deficit can be kept tight, even steering towards surplus, we would not have taken unorthodox measures to temper consumer demand," Mugur Isarescu, said, adding the NBR was standing by any government that fights inflation, regardless of who leads it. The governor added that there was still contact with the IMF, because "you don''t get away so easily from the Fund." The central bank has recently received new signals from Washington showing concern, due to talk of an increase in the inflation target for 2006.
Isarescu yesterday said again that the inflation target remains unchanged at 5%, while the NBR''s inflation forecast for the end of 2006 is 6%, a level that is considered as complying with the accepted deviation level of plus/minus one percent regarding the announced target.
Even though targeting inflation entails a unitary message from the Government and the NBR, Premier Calin Popescu Tariceanu has spoken about capping the inflation rate for 2006 "in the neighbourhood of 5.5-6%," while the NBR is trying to calm the inflationary expectations of the public by sticking to the 5% inflation target.
Governor Mugur Isarescu yesterday specified that the NBR''s forecasts were based on the projected budget the Government had sent to Parliament. "It needs to be clear that we cannot defend any situation. It should not be understood that salaries can be doubled because the NBR is taking care of inflation. How can we stabilise prices when everything is moving?" Isarescu asked rhetorically.
He said that the salary increases, which he saw to a certain extent as being inevitable, could not be offset, as far as NBR is concerned, by anything other than delaying the removal of lending restrictions. razvan.voican@zf.ro
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